Port plans contain the future of Scottish shipping

Consider your prized possessions, from the iPod in your pocket and the computer on your desk, to the running shoes on your feet. They will almost certainly have spent weeks in an unpicturesque 20ft steel box.

Piled high, until processed at the ports with increasing slickness, the proliferation of container traffic on ships of ever-increasing scale means that only the limits of engine power and the depth and handling capacity of ports can prevent economies of scale creating ever-larger container ships.

Time, say the sponsors of Scotland’s container port ambitions at Hunterston in Ayrshire and Scapa Flow in Orkney, for Scotland to seize its moment and take advantage of a growing squeeze on shipping infrastructure resources.

Hunterston’s case will be spelled out by the parent company, Clydeport, in a new two-year plan due next month. If the plans are realised, either or both of Scotland’s two candidates for new deep water ports are capable of swallowing the biggest leviathans maritime technology can devise.

Scotland’s future as a container shipping hub is not yet taken seriously in shipping circles. Nevertheless Bill Burns, director of Hunterston Container Port, believes that the problems of the existing UK port system, the struggling infrastructure in Felixstowe and Southampton, means that what now may seem outlandish will soon become acceptable.

"The current percentage of container trade that is carried on giant containers of over 6,000 TEUs [20ft equivalent units] is 11 per cent. But if the current order book for these ships stays this strong, then by 2005 over 25 per cent of the world’s cargo will be going by this method", says Burns.

"Not many ports in Europe can handle them, and there are serious problems about developing new ones."

A case in point is Dibden Bay near Southampton, refused planning permission because of environmental objections to dredging the wetlands. A second is the projected London Gateway, a brownfield site at Shell Haven in Essex, which will go ahead only if a massive feat of dredging - stretching up to 65 miles - can be achieved.

But more and more giant metal boxes are on their way, whether the established ports are ready or not.

"Over the next ten years shipping cargo in general will grow at 10 per cent a year," says Burns. "In this business you accept that the wheel is continually turning and look at where you want to be in that cycle."

The attractions of Hunterston, he believes, which services a "hinterland" stretching to Scotland, Northern Ireland and England as far down as the north Midlands, could attract ships plying the "Atlantic arc" from the American east coast down to the Iberian peninsula, shaving 18 days from the established United States-UK route via the Channel.

Burns, and his fellow-strategist at Scapa Flow, Jeremy Baster, the development officer of the Orkney Islands Council, are taking their case to would-be investors. The UK’s "puritanical" view of strategic government aid means that they lack a "level playing field" with their European rivals, often publicly owned and eligible for infrastructure grants.

But the situation could be changing. Under its new pro-competition leadership the European Union is less inclined to allow members states to give "soft money" to its port authorities. As this EU money has traditionally been used for dredging, Scottish harbours do not require it so the field may be flattening.

For Hunterston and Scapa, the natural advantages of Scotland’s would-be container port and its relationship to important markets would overcome the disadvantage of Scotland’s distance from the north European circuit of Felixstowe, Rotterdam and Hamburg. The fact that all bets are off for traditional shipping could play to Scotland’s strengths. The new monsters of the deep, plying the sea lanes between Shanghai and Rotterdam, and Los Angeles and Liverpool, are on the verge of a step change, as engineering breakthroughs allow vast up-scaling of sizes. There are ships being built in China and Korea that are more than 400 metres long, weigh 160,000 tonnes and can accommodate 12,000 TEUs, dwarfing the giants of five or ten years ago. If the up-scaling trend continues then the established port structure of the world will be changed, with venerable ports bypassed and better-appointed ones rising up.

The spur for the growth explosion has been buoyant world trade, particularly with China, which has seen the trade in goods grow by an average of 6.9 per cent a year, according to the WTO. Trade in 2004 was a staggering 10.7 per cent higher than in the previous year. For Maersk this translated into net profits of 1.6 billion in 2004, more than double its profits in 2003.

The implications of this shift of scale are still being worked out, but already strategic planning about how to engineer economies of scale are driving revolutions in the industry.

This week, the shipping world was rocked when Moller-Maersk of Denmark moved to recover its market dominance when it bought P&O Nedlloyd, its Anglo-Dutch rival for €2.3bn (1.56bn) boosting its global market share from 12 per cent to nearly 18 per cent.

Maersk made the purchase for two reasons. First because it could afford to pay - and overpay, say many analysts who note the 40 per cent premium on P&O Nedlloyd’s share price.

But there is also an appreciation that Moller-Maersk simply needed more ships. As the shipyards of the world are backed up with orders, the group had to buy a company that could provide them.

For Scotland, it may no longer build seafaring giants, but there is potential future glory in processing them.

EXECUTIVE BACKS BOTH RUNNERS IN TWO-PORT CONTEST

SCOTLAND is well placed to cash in the container-shipping boom, according to a recent report. Commissioned by Scottish Enterprise, the report by Professor Alf Baird of the Transport Research Institute at Napier University, concludes:

• Demand will double in the northern European container port market before 2015

• More capacity is needed to serve the UK import/export market and the Baltic/Scandinavia trans-shipment market

• There is a special need for natural deep water ports like Hunterston and Scapa Flow, which can accommodate giant ships.

• Both Scottish ports offer time and cost savings in likely markets compared with Rotterdam and other planned developments in the UK

• There are environmental gains from developing both ports as there is no need for dredging. Scapa Flow would not impact on road and rail traffic and infrastructure is improved around Hunterston, which is less congested than the South-east.